KUALA LUMPUR: The government’s debt servicing charges (DSC) increased at the end of last year to around 16%, according to Deputy Finance Minister Liew Chin Tong.
This was against 12.5% in 2019 and reflected the sharp increase in debt incurred from 2020 to 2022 to finance the stimulus package and economic recovery plan during the Covid-19 pandemic, he added.
Putrajaya's debt during that period increased by RM286.6bil, an increase of more than 36% from RM793bil in 2019, he said during Minister's Question Time in the Dewan Rakyat on Thursday (Jan 22).
This was also an increase in the debt-to-GDP ratio from 52.4% in 2019 to 60.2% in 2022, he said.
"Therefore, as a prudent government, several fiscal reforms need to be made at this time to ensure that the fiscal deficit and the amount of annual borrowing can be reduced.
"This will directly reduce the amount of debt service payments over time," he told Tan Sri Muhyiddin Yassin (PN-Pagoh), who wanted to know the government’s strategy in addressing debt servicing payments.
ALSO READ: Govt debt servicing charges expected to increase to 16.3% in 2025 - MOF
These payments were expected to take up 16.3% of government revenue by last year. Muhyiddin also asked about the steps taken by the government to reduce this burden.
According to Liew, the fiscal reform and consolidation of debts is based on the Public Finance and Fiscal Responsibility Act 2023, with the government successfully reducing new borrowings from RM100bil in 2021 and 2022 to RM92bil in 2023.
"(This then dropped) to RM77bil in 2024... it is projected to be around RM75bil in 2025 and will continue to be reduced this year.
"This effort has borne fruit with DSC growth being reduced from 12.3% in 2023 to 9% in 2024 and 6.4% last year," he added.
In a supplementary question, Muhyiddin asked about measures to ensure that debt servicing payments would not increase in the coming years.
Liew said efforts by the government since 2022 showed that new borrowings have reduced through prudent administration, and also the rationalisation of subsidies that reduced spending by RM15.5bil.
"Better enforcement has reduced leakages. (Furthermore) the e-invoicing policy and other measures have ensured that the shadow economy has been reduced.
"Debts will always be rolled over, but a clear and prudent direction will be able to reduce leakage and wastage," he added.
